What are mandatory annual compliances of private limited company in India?

Every company registered under the Companies Act, 2013 or earlier act, must comply with the provision of the Act. These provisions require a company to follow some rules and procedures while conducting its operations. Such requirements commonly knowns as annual compliances of private limited company include the holding of the board meeting, the appointment of an auditor, etc.

Since a company is a Separate Legal Entity, it is expected that it follows these compliances to safeguard the interest of stakeholders of the company. These compliances also include annual filing with ROC. Some of the compliances have been discussed in details below.

Annual compliances of Private Limited company

The annual compliances applicable to private limited company can be categorized as:

1. Annual Filings with ROC and Compliances
2. GST Compliances
3. Income Tax Compliances
4. RBI Compliances, where applicable

Annual filings with ROC and Compliances

We have explained the ROC annual filings and compliances in detail below:

Board Meeting

• The First Board Meeting must be conducted within 30 days of the incorporation of the company
• A company must hold a minimum of 4 board meetings during the year.
• The maximum gap between two board meetings cannot be more than 120 days.
• A small company can hold only 2 board meetings during the calendar year. However, there must be one meeting every six months.
• Notice for the board meeting must be sent 7 days before the date of such meeting.

Please remember that is the first compliance as a part of annual compliances of private limited company

Share Certificates

• Share Certificates are documentary evidence that the shares are allotted to the said person on a particular date
• Every company must issue share certificate within 2 months of the date of incorporation
• In case of a new allotment of shares, then also share certificates must be issued within 2 months of the date of allotment of shares.

Directors Report

Directors Reports is a statement of information prepared by the board for every financial year. It is presented by the board at AGM.

Auditor Report

• Auditor Report is a report on the financial viability of the organization. It is prepared by the statutory auditor of the company. It contains the opinion of the auditor on the activities of the company.
• Auditor Report is ratified by the board in the board meeting before AGM and must be placed at the AGM before shareholders.

Annual General Meeting

• A newly incorporated company can hold its first annual general meeting within 9 months of its closing of the financial year. Normally, the time limit is 6 months
• If an auditor wasn’t appointed in the first board meeting, then the company must appoint the statutory auditor in the first AGM. The auditor is appointed for 5 years.
• The agenda of the meeting can be the appointment of a new director, declaration of dividends, appointment/re-appointment of auditors, adoption of financial statements, etc.

 Appointment of Auditor (ADT-1)

• First Auditor of the company must be appointed within 30 days of incorporation of the company in its first Board Meeting. This is in a way the first filing as part of annual compliances of private limited company
• After the appointment auditor in AGM or EGM, form ADT-1 must be filed within 15 days of appointment.
• Consent of an auditor must be obtained to act as an auditor of the company before making any such appointment.

Annual Return (MGT-7)

• Annual Return is filed within 60 days of holding of AGM. It contains details of all disclosures required to be filed by the Act, such as debt of the company, share capital, relevant disclosures, etc.
• It is filed through MCA 21 in form MGT-7.

Financial Statements (AOC-4)

• Financial statements of the company during a year are filed in form AOC-4 on MCA 21 portal.
• The annual accounts adopted by the company and audited by the statutory auditors are required to be filed.
• The due date of filing AOC-4 is within 30 days from the date of AGM.
• One Person Company (OPC) must file its AOC-4 within 180 days of closure of the financial year, as it cannot hold AGM.
• Directors Report is also filed enclosed with AOC-4 at the time of filing.

Please remember that the audit report will highlight the fact if annual compliances of a private limited company are not done properly.

Commencement of Business (INC-20A)

Every company must file, in Form INC-20A, the commencement of business within 180 days of incorporation of the company. Please remember that penalty for not obtaining commencement of business certificate is very high. For companies, it is Rs.50,000 and for directors, it is 1000 per day up to a maximum limit of Rs.1 lakh.

After 180 days of incorporation, if the Registrar has reasonable cause to believe that the company is not carrying on any business or operations, he/she may initiate action for strike off after appropriate notice. This has been introduced in 2018 and carries the maximum penalty of all annual compliances of private limited company and should be adhered to without delays.

GST Compliances

If any company has opted for GST registration at the time of incorporation or later. In such a case, the company must also fulfil GST related compliances. Some of the GST related compliances are as follows:

Monthly GST Return

• A company that has GST registration must file monthly or quarterly GST returns as applicable to the.
• Normally, monthly GST returns include filing of GSTR-1 and GSTR-3B.
• The due date of GSTR-1 is the 10 of the next month, while the due date of GSTR-3B is 20^th of the next month.

Annual Return

• Companies are also required to file annual GST returns. The due date of filing such a return is 31 December of the next financial year.
• The annual return is filed on the GST portal gst.gov.in in form GSTR-9.
• A company whose turnover is more than Rs. 2 crores during the year is also required to file GSTR-9C.

Income Tax Compliances

A company after coming into existence also must comply with the provisions of the Income Tax Act, 1962. These compliances are a part of the annual compliances of a private limited company and shouldn’t be treated separately. As per the provision of the Act, every company even in case of no income must file its Income Tax Return within the due date.

Some of the Income Tax Compliances which a company needs to follow are as follows:

Income Tax Return

• Every company must furnish its income tax return before the due date i.e. 30 September of the assessment year.
• Failure to furnish Income Tax returns results in late filing fees and penalties.

Tax Deducted Return

• Every company must deduct tax at the rate prescribed by the Income Tax Act, 1956, while making a specified payment such as salary, rent, professional fee, etc.
• Companies deducting such tax must also deposit the same by the due date.
• Companies are also needed to file various returns under different forms quarterly or monthly as the case may be, for tax deducted under various provisions

For Example, return for tax deducted u/s 192B, for salary, is filed in Form 24Q

Tax Audit

• Tax Audit refers to the examination and inspection of the Income Tax Return of any person for an assessment year.
• A tax audit is done to ensure whether financial statements submitted by a person give a true or fair view or not.
• A company is required to conduct a tax audit if its turnover during the year is more than Rs. 1 crore
• Form 3CA and 3CD are filed on Income Tax Portal.
• Only a Chartered Accountant is authorized to perform a tax audit.

FAQs – Annual Compliances of Private Limited Company

1. What is the time limit for holding the first board meeting of the company?

The first Board Meeting must be held within 30 days from the date of the incorporation as part of annual compliances of private limited company

2. How many board meetings does a company need to hold during the year?

A company must hold at least 4 board meetings during the year. Small companies are required to hold two board meetings, one each in a half year.

3. What is the due date of the issue of Share Certificates?

A company must issue a share certificate within 60 days from the date of incorporation of the company.

4. What is the due date of holding an AGM?

A company must hold an Annual General Meeting within 6 months from the end of the financial year. For example: For FY 19-20, the due date of holding AGM is 30^th September (if not extended by the ministry).

5. What is the time limit of the appointment of the First Auditor of the Company?

A company must appoint the first auditor within 30 days of incorporation of the Company. This appointment shall be done in a Board Meeting.

6. Which form is filed for intimation of appointment of the auditor?

Form ADT-1 is filed to intimate the ROC of appointment of the auditor of the Company. The due date is within 15 days of the appointment of the auditor.

7. What is form INC-20A? What is the due date of filing Form INC-20A?

Form INC-20A is a form of Commencement of Business. It is filed by a company with ROC to intimate the company that has commenced its operations. It must be filed within 180 days of incorporation of the company.

8. Which form is used for filing of Annual Return of the Company?

Form MGT-7 is used for filing of annual return of the company. This form must be filed within 60 days from the date of holding the Annual General Meeting.

9. What is form AOC-4? What is the due date of filing AOC-4?

Form AOC-4 is used for filing of financial statement of the company with the ROC. The form is filed within 30 days from the date of the holding of AGM.

10. What are the monthly returns that a company must file for GST?

A company must file monthly GSTR-1 and GSTR-3B on GST portal. GSTR-1 contains details of the sale made by the person during the period. GSTR-3B is a summary return of sale and purchases.

11. What is the annual return under GST? What is the due date of filing an annual return?

GSTR-9 is the annual return contains sale and purchases made by the person during the year. It is filed by 31^st December of the year in which Financial year ends.

12. Does a company mandatorily require having a tax audit?

Annual compliances of private limited company require to have a tax audit if it crosses the total turnover of Rs. 1 crore.

13. Are companies required to deduct TDS?

Yes, companies must deduct tax on all transactions qualifying as per the law. The tax must be deposited with the department within the due date prescribed.

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